Time is running out for a number of footballers, celebrities and wealthy individuals who invested in tax schemes, insolvency experts at corporate recovery and business advisory firm Quantuma have warned.
Quantuma’s managing partner Carl Jackson said that as many as 65,000 individuals could have received an Accelerated Payment Notice (APN), follower or closure notice from HMRC.
HMRC is continuing its crackdown on tax avoidance schemes and many who used such schemes are now being hit with tax bills, plus penalties and interest, that could force them into bankruptcy, he said.
Jackson said: “When most of these individuals were introduced to these schemes, they thought they were investing in the UK film industry or helping with UK regional development, while others were simply following practices used in their working environment.
“At the time, few will have considered they were entering anything that people would portray as illegal, wrong or even immoral,” he said.
Many, by investing, believed they were simply deferring tax, he explained.
But five, ten or 15 years later they find themselves entangled in HMRC’s crackdown on tax avoidance, and some are now facing financial ruin.
Many did not realise the impact of their investment being topped up by loans, with the intention of creating further tax deferral.
Jackson continued: “Indeed, the situation for those affected may be further exacerbated if they also participated in Employee Benefit Trusts or Employer-Financed Retirement Benefits Scheme by the 2019 Loan Charge Rules which were introduced in the Finance Bill 2017.
“This states that if a loan in relation to a tax planning scheme is outstanding on 5 April 2019, it has to be declared on the individual’s personal tax return.”
He pointed out that in the past decade, many people had seen dramatic changes in their lives. A footballer, for example, may have retired and now be living on a fixed income. For ex-professionals and those in the media, work can be patchy and so earnings will peak and trough over their career.
In some cases, divorces and subsequent settlements have materially changed an individual’s finances, their assets and net worth. Others find they have limited liquidity with monies tied up in assets and investments.
Jackson said it’s vital that anyone facing financial concerns, and in some cases financial difficulties, take advice as early as possible so they can understand their options and engage with HMRC positively to seek a settlement before it was too late for them.
He said: “The media spotlight has so far focused on the headline cases of well-known sports personalities and showbiz celebrities who put money into tax avoidance schemes, but it’s important to understand the background and how it impacts on all those affected.
“From the early noughties a number of schemes, such as the film partnership arrangements, were set up and marketed heavily as a means of deferring and sheltering tax.
“Clearly this was attractive to higher earners, many of whom are unlikely to have considered, or indeed understood, the detail.”
HMRC never accepted these schemes and, following a change in the law in 2014, the Government enabled HMRC to demand payment of the tax benefit received.
“HMRC’s principal weapon to date has been the APN which identifies the tax HMRC reckons you owe and calls on you to pay it on account.
“At best, this can cause cashflow problems and in many cases it could lead to the individual having to consider bankruptcy.”
Quantuma is urging anyone who was enrolled in a tax avoidance scheme in the past or who has received an APN to take professional advice urgently.
“If you have this problem on your doorstep, it’s clear it won’t go away and the best solution is actively to engage with HMRC, either directly or through experienced advisers, to seek to resolve it.
“It’s always good to talk, and talking to HMRC about your tax position is no exception.”
He said those affected are not limited to those with a high profile, and that professionals, business owners, family members and a wide range of individuals who were earning well in the middle 2000s have found themselves in this position.
Jackson added: “In the case of footballers, it is often more the ex-professional that is now being hit. Perhaps they had a good career, a high-earning season or two or they won one or two international caps. Moreover, they were playing at a time when these schemes were being promoted actively.
“Their earnings will have peaked in a relatively short period, and they often finished their playing career with a rough Plan B for financing the rest of their lives.
“To be hit now with a significant tax bill, a blast from the past, will simply be too much financially for many, but equally focused engagement with HMRC can often enable them, with the aid of their advisers, to find a solution.
“We would urge anyone who is aware they have a problem to act if they haven’t already and take professional advice.
“APNs and other HMRC notices for large sums are very scary documents, but we can sit down with you, assess your assets and finances in their entirety and help you formulate a plan.
“Doing nothing is no longer a choice nor an alternative.”
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For further information, please contact:
Marie Wadeson, Director of Marketing,
Quantuma LLP, High Holborn House, 52-54 High Holborn, London, WC1V 6RL
Tel: 07464 545678
or Andy Skinner, Managing Director, ASAP PR – 07990 978257
Notes to Editors
Quantuma LLP is a leading corporate restructuring, insolvency and business advisory firm delivering partner-led solutions to businesses and individuals facing financial distress with offices in London, Southampton, Marlow, Watford, Brighton, Birmingham, Bristol, Manchester, Ringwood and Weymouth.